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Qm loans definition7/11/2023 ![]() This is especially true in today’s labor market, which is shaped by the growth in self-employment, part-time employment, and “gig economy” employment.”īroeksmit said expenses can fluctuate significantly because some items are not in credit reports (child support or alimony being one example) and others are estimated at application but could change at closing, such as HOA dues, hazard insurance and property taxes. A borrower’s income and expenses can change several times throughout the loan application and underwriting process. “To start, tying an LLPA to a DTI ratio would pose a multitude of operational issues, and compliance challenges, and also create a frustrating and confusing borrower experience,” Broeksmit said. “In addition, a DTI-based LLPA will create costly post- origination quality control disputes between lenders and the GSEs. Mortgage industry trade groups such as the MBA say the new deadline helps, but it doesn’t fix an unworkable problem that represents both a logistical nightmare and also confusion to the customer. ![]() 1, 2023, with the regulator saying the DTI charges wouldn’t affect any loans purchased by Fannie Mae or Freddie Mac in 2023. But the DTI portion of the changes to the pricing grid was pushed back to Aug. The upfront pricing fee on DTI ratios of 40% or more – part of a larger series of changes to the Enterprises’ pricing grids – was slated to go into effect on May 1, 2023. “There is a reason the revised general Qualified Mortgage (QM) definition excludes the DTI ratio: Studies demonstrate that as a stand-alone measure, DTI is not a strong indicator of a borrower’s ability to repay.” “Just about everyone agrees that these are worthy goals, but instituting DTI-based LLPAs is an ill-advised means to achieve them,” Broeksmit argued. The FHFA argues that the changes to the upfront fees on borrowers with a DTI at or above 40% would make the GSEs more “safe and sound” and help them continue to fulfill their mission to advance equitable and sustainable access to homeownership. In a blog post published Thursday, Mortgage Bankers Association (MBA) President and CEO Bob Broeksmit made the case that the Federal Housing Finance Agency‘s (FHFA) loan level price adjustments (LLPA) related to a mortgage borrower’s debt-to-income (DTI) ratio is unworkable and should be scrapped entirely. It’s been delayed, but that’s not enough for the mortgage industry.
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